Fannie Mae Reports $15.2B Loss In Q4

Fannie Mae has reported a net loss of $15.2 billion for the fourth quarter of 2009, compared with a net loss of $18.9 billion for the third quarter of 2009. Including $1.2 billion of dividends on senior preferred stock held by the Treasury Department, the net loss attributable to common stockholders was $16.3 billion for the fourth quarter of 2009, compared with a loss of $19.8 billion for the third quarter of 2009.

The Federal Housing Finance Agency (FHFA), acting as Fannie's conservator, has submitted a request for $15.3 billion from the Treasury on the company's behalf.

Fourth-quarter results were driven primarily by credit expenses, which declined from the third quarter but remained at an elevated level, and Fannie Mae's recognition of a $5 billion loss on its low-income-housing tax credit investments.

For the full year of 2009, Fannie Mae reported a net loss of $72 billion, compared with a loss of $58.7 billion for 2008.

"Our overriding objective is keeping people in their homes whenever possible," says CEO Mike Williams, noting that homeownership assistance initiatives reached more than 3 million borrowers last year. "At the same time, we want to help build a stronger foundation for housing in America by supporting sustainablehomeownership. That means offering home buyers mortgages with terms that enable them to keep their homes, not just purchase them."

Williams notes a "substantial improvement" in the credit characteristics of loans that Fannie Mae acquired in 2009. For 2009 acquisitions by the company's single-family business, the weighted average original loan-to-value ratio (LTV) was 67%, and the weighted average FICO credit score was 761, while refinancings constituted 80% of acquisitions, interest-only loans were 1%, and acquisitions of subprime and Alt-A loans were not statistically significant.

In 2007, Fannie Mae's worst-performing acquisition year during the past decade, the weighted average original LTV was 75%, and the weighted average FICO credit score was 716, while refinancings constituted 50% of acquisitions, interest-only loans were 16%, and subprime and Alt-A loans were 17%.

"While it is too early to predict the ultimate performance of these loans, we believe that the credit riskcharacteristics of our 2009 loan acquisitions are the strongest for any acquisition year in the past decade," Williams says.

Credit-related expenses, which are the total provision for credit losses plus foreclosed property expense, were $11.9 billion in the fourth quarter – down from $22 billion in the third quarter.

Total nonperforming loans in Fannie Mae's guaranty book of business were $216.5 billion at the end of 2009, compared with $198.3 billion at the end of September 2009 and $119.2 billion at the end of 2008. The carrying value of Fannie's foreclosed properties grew from $7.3 billion at the end of the third quarter to $8.7 billion at the end of the fourth quarter.

"Although there have been signs of stabilization in the housing market and economy, we expect that our credit-related expenses will remain high in the near term due, in large part, to the stress of high unemployment and underemployment on borrowers and the fact that many borrowers who owe more on their mortgagees than their houses are worth are defaulting," according to a Fannie Mae statement. "However, we believe that, absent further economic deterioration, credit-related expenses will be less in 2010 than in 2009."